San Jose Mercury News Article

San Jose Mercury News Article

John Boudreau of San Jose Mercury News interviewed me for this article on iPhone

New iPhone unveiled today?


By John Boudreau
Mercury News

Article Launched: 06/09/2008 01:30:24 AM PDT

It’s not even a year old, but Apple’s iPhone is captivating consumers and competitors in a way no other cell phone has.

It has raised the bar on what callers demand from their smart-phones and inspired a host of copycats.

But the widely praised and wildly publicized gadget is still a work in progress, and most experts say it has far to go before it really transforms the wireless industry. Nokia, for instance, sells more phones in a week than Apple sold in 10 months, and experts say the iPhone’s high price limits its appeal.

“The publicity and hype around Apple and the iPhone is hugely out of proportion to their impact on the industry,” said Edward Snyder, a cell phone expert at Charter Equity Research.

That may change. Apple is all but certain to announce an upgraded version soon, perhaps as early as today, when Steve Jobs addresses a gathering of Apple software developers in San Francisco.

Apple watchers expect the new version to take advantage of a faster wireless network, dubbed 3G for “third generation,” improving what many consider to be the current version’s key flaw – its slow Web access.

“It’s clear they have to do 3G,” said Rob Enderle, founder and principal analyst at the Enderle Group, a technology consulting firm.

But even if that doesn’t happen today, Apple’s chief executive is sure to talk about new programs that will make the iPhone more like a computer for your pocket than merely a communications device.

And most analysts expect it to eventually become a culture-shifting product like the iPod, which helped change how the masses get and listen to music.

“They’ve done what they’ve always done – come up with something radically different,” said Ken Dulaney, an analyst with Gartner, a research firm.

IPhone’s influence

Even with plenty of room for improvement, the iPhone has also changed the way people use smart-phones, said wireless industry analyst Chetan Sharma. T-Mobile, for instance, reported that its German iPhone users devour 30 times more data than its other wireless subscribers.

“Every major carrier in the world has been trying to figure out how to launch an iPhone on their network,” he said.

For some, it has become much more than a communications device.

“It almost feels like you are looking at the world through this device – the sense of being able to reach through this device and touch all these things,” said John Seely Brown, former chief scientist and director of the Xerox Palo Alto Research Center.

“Think when this thing becomes blindingly fast – think what it will do,” he said.

Upgrades on display

The iPhone remodeling effort will be on full view this week as Jobs kicks off Apple’s Worldwide Developers Conference at San Francisco’s Moscone West. The five-day gathering for the first time features iPhone sessions for mobile-device software developers.

The iPhone’s future success will depend on these programs, said Tim Bajarin, president of Creative Strategies, a tech research firm.

“We did not see a real breakthrough with the PC until we saw products like Office, word processing, games – consumer-based software,” he said.

There is also plenty of speculation on other new features. Many users would welcome some sort of global positioning system and an upgraded camera.

But the iPhone, at this point, is more promise than market-dominating power. As of the end of March, Apple said it had shipped 5.5 million since its release last June. The company, which sold 1.7 million during the first three months of 2008, said it will sell 10 million iPhones this year.

But Apple faces a struggle to meet that goal, which is still just a small slice of the overall mobile phone market, said Snyder.

Still, Apple’s iPhone had captured 28 percent of the smart-phone market in the United States by the fourth quarter of 2007 – just six months into its launch – behind Research in Motion’s BlackBerry, which had 41 percent of sales, and significantly ahead of Palm’s 9 percent, according to research firm Canalys.

Perhaps the biggest hurdle the iPhone faces now is its cost. It comes in two models, an 8-gigabyte version for $399 and a 16GB version for $499.

AT&T, Apple’s exclusive U.S. carrier partner, reportedly plans to subsidize $200 of the cost of the next-generation iPhone for consumers who sign up for a two-year service contract.

“The iPhone is too high-priced to be mainstream,” Piper Jaffray analyst Gene Munster said. “We think in 2009 the price will be more mainstream. The iPhone is going to be huge. It’s just taking time.”